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Jan 30 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Liechtenstein-based PrismaLife AG (PL) Insurer Financial Strength (IFS) rating at ‘BBB+', Long-term Issuer Default Rating (IDR) at ‘BBB’ and senior bond rating at a€˜BBBa€™. The Outlooks on the IDR and IFS rating are Stable.
The affirmation reflects the life insurera€™s strong capital position and low investment risk, which Fitch expects to be maintained, and its solid performance in 3Q13. On the other hand, the ratings are constrained by PLa€™s dependency on unit-linked products and its fairly small size with total assets of EUR855.6m and shareholdersa€™ funds of EUR50.4m in 2012.
PL faces limited investment risks as policyholders primarily carry the risk of falling equity markets. Fitch views positively that PL largely reinsures its mortality and disability risks. This risk-averse approach leads to lower regulatory capital requirements resulting in a regulatory capital position of over 1,000%. Fitch expects PL to maintain a strong regulatory solvency ratio under Solvency II. Under Fitcha€™s own risk-based capital assessment and stress testing, PLa€™s capitalisation is strong and resilient.
Fitch also takes a positive view of PLa€™s continued strong growth in both new business and gross written premiums (GWP) in 3Q13 and its consistent growth of its regular premium business since its incorporation in 2000. In 2012, PL confirmed the turnaround in GWP growth with a yoy increase of 6.8% to EUR212.4m (2011: 11.5% to EUR198.8m), following stagnating premiums between 2008 and 2010. PLa€™s net income was stable at EUR2.9m in 2012 (2011: EUR2.8m) equalling a return on assets of 0.47% (2011: 0.48%) which Fitch regards as strong. PLa€™s financial leverage was 31% at end-2012 (2011: 33%) with interest coverage at 3.6x (2011: 3.9x), in line with the current rating level.
Fitch will continue to follow PLa€™s premium development as consumer demand for unit-linked insurance products tends to be volatile. However, new business volumes are supported by the fact that PLa€™s largest distribution partner, sister-company Onesty Sales, is one of the five largest sales organisations within the German life insurance market.
Product diversification in PLa€™s book of business is low as premium income consisted of 99% unit-linked policies at end-2012. However, Fitch considers it positive that PL continued to diversify in 2013 by introducing more products to its biometric product line in cooperation with fpb AG, a subsidiary of Friends Provident International. Fitch believes PLa€™s GWP growth and product diversification will benefit from the extended biometric product line.
Key rating triggers for an upgrade include sustained above-market-average GWP growth and improved earnings diversification while maintaining strong capitalisation.
Key rating triggers for a downgrade include below-market-average GWP growth and a sustained weakening in profitability resulting in a return on assets below 0.30% over a prolonged period of time.
PL had total assets of EUR855.6m at end-2012 (2011: EUR722.9m) and is owned by Onesty Group AG (76.85%), and its management team (23.15%).